The statement of profit or loss of Zang Co shows accrual-basis interest income for the year ended 30 June 2016 as $400. The comparative balance sheets show that interest receivable at 30 June 2015 and 30 June 2016 was $45 and $80 respectively. Determine the amount of cash received by way of interest during the year.

Question

Quizplus · Accepted Answer

The accrual-basis interest income of $400 represents the total interest income earned during the year, regardless of whether it was received in cash or not. To determine the cash received by way of interest, we need to look at the change in interest receivable from the beginning to the end of the year, which is an increase of $35 ($80 - $45). This means that $35 of the interest income recognized on an accrual basis was not received in cash during the year. Therefore, the amount of cash received by way of interest during the year is $400 - $35 = $365. Choice B is the correct answer.

The Statement of Profit or Loss of Zang Co Shows